Robert Wilmers is the respected CEO of M&T Bank (MTB) which is one of the best run banks in the United States. M&T focuses on traditional lending activities and has a sterling record in underwriting good loans. In his most recent shareholder letter Wilmers makes many salient points, and add some rather scathing commentary on the dissolution of solid banking standards. There are many gems in this shareholder letter but one that I found particularly interesting was his commentary about the credit rating agencies.
“In a recent M&T study, we looked at a sample of 2,679 residential mortgage-backed issues originated between 2004 and 2007 with a total face value of $564 billion. Of that sample 2,670 or 99% were rated triple-A at origination by S&P. Today 90% of those bonds are rated non-investment grade.”
It’s amazing how easy the credit ratings agencies have gotten away with things relative to the stiff fines and increased regulations effecting the banks.